public serviceenterprise group 1q08slides
TRANSCRIPT
Public Service Enterprise Group
PSEG Earnings Conference Call1st Quarter 2008
May 6, 2008
1
Forward-Looking Statement
Readers are cautioned that statements contained in this presentation about our and our subsidiaries' future performance, including future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance they will be achieved. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, but are not limited to:
• Adverse Changes in energy industry, policies and regulation, including market rules that may adversely affect our operating results.• Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and/or regulatory approvals from
federal and/or state regulators.• Changes in federal and/or state environmental regulations that could increase our costs or limit operations of our generating units.• Changes in nuclear regulation and/or developments in the nuclear power industry generally, that could limit operations of our nuclear generating
units.• Actions or activities at one of our nuclear units that might adversely affect our ability to continue to operate that unit or other units at the same
site.• Any inability to balance our energy obligations, available supply and trading risks.• Any deterioration in our credit quality.• Any inability to realize anticipated tax benefits or retain tax credits.• Increases in the cost of or interruption in the supply of fuel and other commodities necessary to the operation of our generating units.• Delays or cost escalations in our construction and development activities.• Adverse capital market performance of our decommissioning and defined benefit plan trust funds.• Changes in technology and/or increased customer conservation.
For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our estimates change, unless otherwise required by applicable securities laws.
2
GAAP Disclaimer
PSEG presents Operating Earnings in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes the impact of the sale of certain non-core domestic and international assets. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. These slides are intended to be reviewed in conjunction with the oral presentation to which they relate.
PSEG 2008 Q1 Review
Ralph Izzo
Chairman, President and Chief Executive Officer
4
Q1 2008 EPS Summary
$ 8$ 14Discontinued Operations
$ 0.63$ 0.85EPS from Operating Earnings
$ 329$ 448Net Income
$ 321$ 434Income from Continuing Operations
--($ 1)Impact of Asset Sales (Bond Premiums)
$ 321$ 435Operating Earnings
Q1 2007Q1 2008$ millions (except EPS)
5
PSEG – Q1 2008: Accomplishing goals
Operations
Regulatory and Market Environment
Financial
Salem 2 refueling and steam generator replacement underway – on time
Nuclear fleet operating in line with expectations
FERC approved incentive rate treatment for 500kV Susquehanna line
NJ Board of Public Utilities approved $105 million Solar Initiative
State of NJ Draft Energy Master Plan released
Earnings in line with expectations
Strong liquidity
PSE&G redeemed auction rate bonds
6
Earnings – Maintaining guidance
$0.00
$1.00
$2.00
$3.00
$4.00
2007 Operating Earnings 2008 Guidance 2009 Guidance
$2.71$2.80 – $3.05
Earn
ings
per
Sha
re
$3.05 – $3.35
PSEG 2008 Q1 Review
Tom O’FlynnExecutive Vice President and Chief Financial Officer President – PSEG Energy Holdings
8
Q1 Operating Earnings by Subsidiary
$ 321
(18)
(11)
131
$ 219
2007
$ 435
(5)
29
136
$ 275
2008
Operating Earnings Earnings per Share
(0.04)(0.01)Enterprise
$ 0.63$ 0.85Operating Earnings
(0.02)0.06PSEG Energy Holdings
0.260.26PSE&G
$ 0.43$ 0.54PSEG Power
20072008
YTD March 31 $ Millions (except EPS)
9
$0.63
.11 .00
.08 .03 $0.85
0.00
0.25
0.50
0.75
1.00
Taxes .04
Weather (.02)
O&M / Other (.02)$
/ sha
rePSEG EPS Reconciliation – Q1 2008 versus Q1 2007
Q1 2008 operating earnings
Q1 2007 operating earnings
Interest expense
Re-contracting / Strong markets
.15
MTM .01
Global
Effective tax rate .06
Texas - MTM .04
Interest expense .02
Asset sales (.03)
Absence of settlement (.01)
Resources
Tax rate .01
Absence of settlement (.01)
NDT / Other (.03)
BGSS (.01)
Interest expense (.01)
Power PSE&G Holdings Enterprise
PSEG Power 2008 Q1 Review
11
PSEG Power - Q1 2008 EPS Summary
$ 226$ 2,149$ 2,375Operating Revenues
$ 0.11$ 0.43$ 0.54EPS from Operating Earnings
$ 62 $ 213$ 275Net Income
$ 6($ 6)--Discontinued Operations
$ 56$ 219$ 275Income from Continuing Operations
$ 56 $ 219$ 275Operating Earnings
VarianceQ1 2007Q1 2008$ millions (except EPS)
12
$0.43
.15.00
(.04)$0.54
0.00
0.20
0.40
0.60
0.80
Recontracting and strong
markets
$ / s
hare
PSEG Power EPS Reconciliation – Q1 2008 versus Q1 2007
Q1 2008 operating earnings
Q1 2007 operating earnings
MTM .01
BGSS (.01) NDT / Other (.03)
Interest expense (.01)
13
PSEG Power – Generation Measures
7,456 7,264
3,142 3,660
2,3122,778
0
5,000
10,000
15,000
2007 2008
Quarter ended March 31
Total Nuclear Total Coal* Total Oil & Natural Gas
* Includes figures for Pumped Storage
PSEG Power – Generation (GWh)
12,91013,702
14
PSEG Power – Q1 Operating Highlights
Salem 2 refueling and steam generator replacement outage underway – on timeGeneration output increased 6% in quarter
Nuclear ↓ 2.6% (reflecting outage)Fossil ↑ 18.0%
O&M expense flat year-over-year
Improved pricing for energy in PJM, New York and New EnglandBenefiting from roll-off of below market contracts
Equity market performance resulted in NDT fund loss of $0.03/share$125 million dividend paid to PSEG
Operations
Regulatory and Market Environment
Financial
15
Prices and operations yield margin improvement
$0
$20
$40
$60
Q1 2007 Q1 2008
PSEG Power Realized Gross Margin($/MWh)
$44
$51
PSE&G 2008 Q1 Review
17
PSE&G – Q1 2008 EPS Summary
$ 4$ 821$ 825Gross Margin*
--$ 0.26$ 0.26EPS from Operating Earnings
$ 5$ 131$ 136Income from Continuing Operations/ Net Income
$ 5$ 131$ 136Operating Earnings
$ 132$ 2,486$ 2,618Operating Revenues
VarianceQ1 2007Q1 2008$ millions (except EPS)
*Gross Margin = Operating revenues less energy costs
18
$0.26 (.02) .02 $0.26
0.00
0.20
0.40
$ / s
hare
PSE&G EPS Reconciliation – Q1 2008 versus Q1 2007
Q1 2008 operating earnings
Q1 2007 operating earnings
Weather:
Gas (.02)
Taxes .04
O&M (.01)
Other (.01)
19
PSE&G – Q1 Operating Highlights
Sales• Degree days 6.6% below normal
O&M expense under control despite storm
NJ Board of Public Utilities approved $105 million solar initiativeFERC approved PSE&G request for Susquehanna to Roseland transmission line incentive rate treatmentFERC approved 69kV transmission investmentState of NJ issued its Draft Energy Master Plan
Customer receivables within normal levelsAuction rate bond risk mitigated
Operations
Regulatory and Market Environment
Financial
PSEG Energy Holdings 2008 Q1 Review
21
PSEG Energy Holdings – Q1 2008 EPS Summary
$ 0.08($ 0.02)$ 0.06EPS from Operating Earnings (Loss)
$ 39$ 3$ 42Net Income
($ 1)--($ 1)Impact of Asset Sales (Bond Premiums)
--$ 14$ 14Discontinued Operations
$ 40($ 11)$ 29Operating Earnings (Loss)
VarianceQ1 2007Q1 2008$ millions (except EPS)
22
($0.02)
.04
.06
.02 (.04)
$0.06(.01) .01
-0.05
0.00
0.05
0.10
$ / s
hare
PSEG Energy Holdings EPS Reconciliation – Q1 2008 versus Q1 2007
Q1 2008 operating earnings
Q1 2007 operating earnings
Asset Sales (.03)
Absence of settlement
(.01)
Effective tax rate
Interest expense
Texas - MTM
Absence of settlement
Tax rate
GLOBAL RESOURCES
23
PSEG Energy Holdings – Q1 Operating Highlights
Texas operations in line with year ago performance International operations stronger versus year-ago
Valuations remain strong for international assetsTexas near-term spark spreads stronger in south zone offset by weaker west zone
Retired approximately $600M of bonds – lower interest
Operations
Market Environment
Financial
Summary
25
Cash flow projection
During Q1 2008, cash from operations improved by approximately $100 million over the same period last year. Excluding changes in working capital, cash from operations is approximately $140 million higher than the first quarter of 2007.PSEG expects that it could have up to $3 billion of cash available through the end of 2011 to pursue disciplined growth of its businesses or to repurchase common stock.Our forecast of cash available over 2008-2011 assumed some financing costs associated with meeting potential tax claims related to Holdings’ leveraged lease investments.Our ultimate liability could exceed our forecast and may be met sooner than anticipated. However, management believes that the impact of any financing activity would have a manageable impact on its key credit metrics.
26
PSEG - Summary
The PSEG organization has maintained its focus on safe and reliable operations
Significant progress achieved on PSE&G regulatory initiativesEnergy markets responding to tight supply conditions
Strong liquidity position and balance sheet supported PSEG during difficult credit market conditionsLILO/SILO potential tax liability manageable within PSEG key credit metrics
Operations
Regulatory and Market Environment
Financial